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Curated SaaS and tech insight from around the web repackaged for people to put to good use
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1. SaaS METRIC OF THE WEEK: MRR: According to this article, there are only five types of MRR growth that hinge on expansion and reactivation. Chartmogul takes a more emotional approach to MRR segmenting (new, happy, and at risk). MRR is a simple concept until you actually need to compute it. Benchmark your MRR here.
2. MARKETING: There are many marketing strategies organizations can deploy that are relevant to their line of business and target audiences, from pay-per-click to content marketing. Bloom lists the differences between the three main categories. Cutting to the chase, though, creating a solid marketing strategy is no walk in the park, so look here at how to make a solid one in 7 steps. (BTW - benchmarking budget - Marketing teams spend 5-10% of a company's ARR). 3. EXPONENTIAL GROWTH: It's all marketing hype and doesn't exist in real life. Take a look at this article, which explains it more by taking a deep dive into the numbers of "Exponential" companies such as Slack ($0-$10m ARR in 10 months!!), Facebook, and HubSpot. According to McKinsey, despite the sector's image as a bastion of hypergrowth, only a tiny share of SaaS companies sustains growth rates above 30 to 40 percent. 4. INDUSTRY: Public software markets saw some sharp declines last month, and according to Tomasz Tunguz, it was all due to declining revenues. Growth rates for many public tech companies have halved in the past 18-24 months (even though revenue increased from $124B to $592B. Giants like Salesforce face growth challenges, but private market data still shows strong potential. 5. SALES: Do technical products need a different sales process than traditional enterprise SaaS products? Check out this guide on Tech SDRs. Understanding developer needs is key for these reps to selling DevTools efficiently. 6. VESTING: Different companies have different vesting schedules to align employee incentives with long-term goals and retention. Levels.fyi explores some different strategies, highlighting approaches like front-loaded, milestone-based, and retention-focused plans. 7. PITCH DECK: Another pitch deck resource this month from Alexander Jarvis, who hosts almost 540 of them (and 10,000 pages)! The cool feature here is that you can search/filter startup decks by stage, topic, and country. 8. RED QUEEN EFFECT: I'm running my first presentation on AI this week, and during my research, I came across this great article from Clouded Judgement talking about AI and its impacts. The Red Queen Effect analogy was used, referencing Lewis Carroll's "Through the Looking-Glass," where the Red Queen says, "It takes all the running you can do, to keep in the same place." I couldn't agree more, and neither can the 85%-ish of B2B SaaS companies currently building AI into their product sets. Businesses must constantly invest and evolve to stay competitive. Immediate benefits may not be clear, but long-term gains in efficiency, innovation, and market relevance are highly likely. The potential downsides to not doing all the running you can do are massive. 9. DISASTER: If you were not sleeping under an IT rock last weekend, you probably noticed that many Tech Workers had a VERY insane week fixing a massive global Windows outage caused by just one publicly traded SaaS Company, Cloudstrike. From many accounts, it was a total shit show of anti-malware malware that poor or ill-prepared Business Continuity Plans, lack of redundancy, and risk management compounded. This was the real Y2K, 25 years late, and today is the second-best day (the best being before last weekend) to revisit your BCPs; check GitLab's BCP for an example of a real one. Here are some teachable lessons for all of us. Ironically, Crowdstrike has a great incident response checklist. 10. CASE STUDY: Reaching 100 users in four weeks? I'm in! This is actually a great, soon-to-be 3-part series on growth, with this first part focusing on the cold-start problem of going from 0 to 1000 users. POD OF THE WEEK: Building a world-class data org from Jessica Lachs of Doordash. 1. SaaS METRIC OF THE WEEK: Renewal rate: You have to scroll down to the bottom of this article before you get to the informative bit on measuring this metric (I could also link you to this one). But please read the first part, too - it's great. TL;DR: Don't be a jerk when it comes to renewals. If you have to be, maybe it's you, not your customers (and then keep scrolling again to see the five main reasons why people unsubscribe). This additional article from Profitwell on Renewal Rates also describes the differences between retention and renewals.
2. COMMAND: This is always a much-needed read. Being 'in command' of your business doesn't mean you're in control, and that's OK—it involves proactive, agile leadership that drives change, acknowledges challenges, and seeks solutions, ensuring autonomy and accountability for success. 3. VALUATIONS: Wait - what now??? According to some Pitchbook data fresh from the press last week, early and late-stage VC deals (so not Seed or pre-seed) valuations in the U.S. reached all-time highs in H1 2024. Sounds promising? Pinch of salt time though: it's date from much lower deal volumes of primarily strong companies. Right at the start of the article though, IVP's general partner, Tom Loverro, asserts that us startups that survived this period should shift from cash preservation to growth mode (did we not learn anything??). 4. INDUSTRY: What is Old is New Again. This is a great article reviewing Gergely Orosz's recent talk, in which he discusses the profound recent tech industry shifts and their impact on business strategies, software engineering, and layoffs. It all comes down to interest rates, IPOs, and VC funding changes that have reshaped the tech industry. 5. AI: This is a super interesting thread I wish wasn't just a Twitter post. I also agree with it and actually had a partially drafted essay on it, which motivated me to finish it. I was an original rack and stack infrastructure engineer, which all changed after virtualization and the public cloud. Engineers will not be replaced by AI, but so much day-to-day work is boilerplate that their roles, like mine, will be abstracted up toward design and outline. Why type when you can write? 6. SDRs 1 of 2: SDRs and AEs are putting in way more effort to get less results these days than in the past. It's hard out there. So, if you need to build out SDR teams in your business (see here if you should—you need to have a minimum $3- $4k ACV product), Bessemer Venture Partners has a great article on how to do this well. 7. SDRs 2 of 2: Benchmark time to compliment #6 above. Look at the 2023 SDR Bridge Group SDR Survey for great benchmark metrics, such as how long does it take for an SDR to ramp? (According to past studies, time to ramp for an SDR averages about 3.2 months.)? And how many calls does it take to book one meeting? What about SDRs: AE ratio? This article goes all out and pitches a Mendoza Line for sales reps based on value to the company (not just quotas). BONUS: SDR compensation calculator (Excel). 8. FUNDS: According to end-of-H1 data from Pitchbook, the global VC market continues on a downward spiral in fundraising, with what looks to be the lowest amount of capital raised since 2015. Pitchbook uses the word "Grim" to describe the market, which, of course, has big implications downstream for startups' access to capital. 9. GROWTH: ChartMogul reports further sluggish SaaS growth in H1 2024, with median growth rates at 23%-ish, compared to 30% in H1 2023, 46% for 2022, and 63% in 2021 (on the positive side, it seems to have flattened). Customer acquisition costs are rising (see #6 above), and churn rates have slightly improved. Economic uncertainty and market saturation are the two big factors still impacting growth. 10. CASE STUDY: Most of us should be so lucky to get to this stage, but how do you raise funds beyond Series B (roughly 15% that raise Seed make it to Series B)? Scale Ventures' Stacey Bishop gives the lowdown. POD OF THE WEEK: The YouTube presentation of #4 above. A review of the past 18 months has seen major changes reshape the entire tech industry almost overnight. 1. SaaS METRIC OF THE WEEK: People are the most important (and expensive) metric for any company, especially SaaS (yes, I would argue more important than the actual product). Revenue per FTE is one metric to measure when it comes to company efficiency via people efficiency, but a better one, perhaps, is the ROSE Metric (Return on SaaS Employees). This metric highlights the tradeoffs between headcount, recurring revenue, and EBITDA growth of a SaaS company.
2. HOMEPAGES: The never-ending quest to create the perfect homepage. While there's no such thing as a "perfect homepage," there are certainly best practices you can follow. This article breaks it all down and claims to be the ultimate guide. 3. GROWTH: This fantastic read by the team at Reforge argues that choosing between monetization and growth is a false dichotomy, suggesting businesses can successfully balance both for sustained, scalable success and also outline Growth as a system with three elements: acquisition, monetization, and retention. 4. CHARTS: This is a fun one. "Friends Don't Let Friends Make Bad Graphs" is a GitHub article outlining some good and bad practices in data visualization. It includes examples and explanations. 5. AI ADOPTION: Even though apparently 60% of us released GenAI features last year (see #3 in last week's newsletter), Tomasz Tunguz notes that AI adoption remains slow in some areas. (Opportunity time?) Security, legal complexities, and meeting procurement standards seem to be the top reasons! 6. GTM DATA: I needed this over the past two weeks. GTM partners have a really pragmatic article covering essential metrics and KPIs for your go-to-market strategy (at different stages), covering inbound, outbound, PLG, partner, community, and event-led growth. After all, you can't manage what you can't measure. It has scorecard templates, too! 7. VERTICAL SAAS: Many Big Tech companies are under threat from narrowly focused SaaS companies taking market share in niche areas and building massive businesses. Check the difference between vertical and horizontal SaaS here, and then take a look at how these vertical SaaS companies are taking market share from those cloud giants and how AI and Vertical SaaS are the outliers to achieving solid growth in this current market. 8. GROWTH: Dealroom explores the traits of top-tier SaaS startups, focusing on growth rates, unit economics (my new fav is Revenue per employee broken down by company size - see #1), and retention. Key factors include innovative products, efficient sales models, and scalability. 9. DILUTION: This is a fantastic Chart from Carta: How much equity dilution is normal? At the Seed and Series A stage, businesses usually see around 20% equity dilution. At later stages (Series C-D), dilution drops to ~10% per round. 10. CASE STUDY: Adding onto #7 above, some learnings on Vertical SaaS from Toast & Procore. Includes the importance of industry-specific solutions, seamless integration, and focusing on customer needs POD OF THE WEEK: Funnel and revenue math, kindly explained by Mark Roberge and Matt Plank of Rippling in the Science of Scaling podcast. 1. SaaS METRIC OF THE WEEK: We all know the core SaaS Metrics - CAC, LTV:CAC, ACV etc, etc. But Kyle Poyar from OpenView Partners is making the case for the next era of core metrics. With product lead, expansion, and margin profiles (such as ARR per FTE) being at the core of this new potential playbook.
2. SEED: Too raise or not to raise that is the question most often asked at the Seed stage. Peter Walker of Carta posits that founders should not raise a small seed round. He reviewed 4,000+ software startups and concluded (with a bunch of caveats) that small seed rounds have a lower probability of getting to a Series A in under two years. 3. CAPITAL: Last week, liquidity posts were popular - so here is some more data. Emergence has released a report titled "Beyond Benchmarks 2024," packed with data from B2B startups (60% of which released GenAI features last year). At the early stage ($1m-$5m ARR), top startups are growing 100%, and the median is 53%. For companies $5m-$20m ARR, top quartile are growing 58% but the median is only growing at 29%. It gets really out of whack with companies at the $20m-$50m range. The top quartile is at 38%, but the bottom bunch is at -7% (yup, that's negative growth). 4. MULTIPLES: Dealroom has a great guide on multiples with in-depth reviews of valuation multiples for public companies, VC rounds, and exits. These multiples vary by stage, sector, and geography, with a big focus on growth and profitability. The guide also explains methodologies for calculating and interpreting these multiples, providing a comprehensive resource for understanding company valuations. 5. CHURN (AI): Bessemer Venture Partners has a good guide for B2B and B2C AI apps with seven strategies to reduce churn, from enhancing user onboarding to leveraging AI-driven insights for customer retention (B2C AI apps are showing weaker long-term retention rates compared to standard app churn rates). 6. LANDING PAGES: Want to get better at creating effective landing pages? Scrapbook's SaaS landing page optimization checklist provides a guide to creating compelling headlines, using high-quality visuals, optimizing for mobile, indexing, and, of-course, using include strong CTAs to boost conversions. BONUS: How to write killer CTAs. 7. STATE OF THE CLOUD 1: The Bessemer Ventures State of the Cloud Report is out. It's packed full of highlights and well worth taking a deeper look at. But here are some highlights: AI is transforming the cloud, but concentrated at the model layer. AI investments have soared, and now every cloud company is, at some level, an AI company. We're certainly all more efficient at building, apparently. 8. STATE OF THE CLOUD 2: The consumer cloud sector is experiencing a resurgence (see the other Bessemer post at #5 above), driven by new innovative AI applications. This trend signals a revitalized market with new opportunities for growth and investment. 9. STATE OF THE CLOUD 3: The AI wars are well underway, and Big Tech's investment in AI is setting the stage for a major tech battle. All of the Big Tech companies are seeing big rebounds to "normal" multiples (along with big outliers like NVIDIA at 22x) and also on AI-quisition burns. 10. CASE STUDY: Three well-known SaaS success stories with very diverse paths, strategies (and financial health). Monday.com has robust revenue growth and solid free cash flow (also in scale-up mode). Atlassian is more established, with capital-efficient growth and high profitability. Despite strong revenue growth and being around forever, Asana struggles with high cash burn. POD OF THE WEEK: Dario Amodei, CEO of AI company Anthropic, talks about the amount of compute used in training (compute costs for models have been increasing ~4x a year). Dario is also predicting $1 billion and even $10 billion training runs soon! |
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